Far East Hospitality Trust (FEHT) posted a solid set of results which were within our expectations. 4Q18 revenue increased 12.4% YoY to S$28.9m while NPI increased 13.9% YoY to S$26.3m. 4Q18 DPU increased 3.1% YoY to 1.00 S cent.

For the full-year, DPU increased 2.6% YoY to 4.00 S cents and came to 99% of our fullyear forecast. 4Q18 RevPAR for hotels increased 7.5% YoY to S$142.

This solid performance was due to the portfolio enjoying an uptick in market demand, the positive skew from the addition of Oasia Hotel Downtown to the portfolio, and the recent renovation of Orchard Rendezvous Hotel (formerly as Orchard Parade). Surprisingly, RevPAU for serviced residences also grew 7.5% YoY, to S$179, mainly due to a 6.1 ppt increase in occupancy.

FEHT has achieved four consecutive quarters of DPU growth in FY18 and we believe operational prospects ahead are bright given an improvement in the hotel room supply situation.

We maintain BUY but place our fair value of S$0.675 under review pending further details from the briefing.

Source: OCBC Research - 13 Feb 2019